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Rising income is the most powerful driver of Indian gold demand

Gold futures slipped in morning trade on Thursday following the trend in the international market, as bond yields rose which lead to increasing outflows from the yellow metal.

Higher US and Indian bond yields tend to hurt bullion’s appeal as a hedge against inflation since they increase the opportunity cost of holding the yellow metal which does not pay any interest.

Sharp gains in equities also weighed on gold’s appeal. Extending the strong gains of the previous session, market benchmark Sensex jumped over a percent in early deals today.

On MCX, April gold contracts were trading lower by 0.15% at Rs 46,451 for 10 gm morning trade. March silver futures were trading 0.57% higher at Rs 69,940 a kg.

Gold has lost some sheen as investors turned to riskier assets in bonds and stocks amid a global liquidity binge which looks here to stay in the short term.

In fact, gold prices today have extended decline to the third day in Indian markets.

After the recent decline, are now down about ₹10,000 per 10 gm as compared to August highs of ₹56,200 per 10 gm,

As for an outlook on gold prices, Anuj Gupta, Deputy Vice President, Commodity and Currency Research at Angel Broking has said, “Gold is expected to go down on back of rising US bond yield, it may test Rs 45,500-45,000 levels on MCX”.

For traders, one must wait for some more correction to buy as the the rising bond yields may continue to cap upside, said Gupta.